3. 3
Climate services are a fundamental element for national climate change adaptation strategies
in climate-sensitive sectors. Widely considered as “public goods”, one would think that such
services should be financed publicly. Quantitative evidence of the socio-economic benefits (SEB)
coming from user-tailored climate services constitutes a necessary building block for public
policy making which helps mobilizing the required financial resources.
Bespoke climate services meeting the needs of smallholder farmers carry the potential for
building resilience to climate change. As such they contribute to developing a climate-smart
agriculture and thus, ultimately, enhancing food security and reducing poverty, especially in
rural and mountainous regions. This booklet presents the results of a first pilot case study for
the coffee and maize sectors in the Peruvian region Cusco. They hold good promise that efforts
of this kind replicated in other sectors will confirm the potential value that flows from public
investments into user-tailored climate services.
Through the CLIMANDES project, SENAMHI and MeteoSwiss join forces to generate the required
climate services. This innovative collaboration between two high-mountain countries forms part
of the WMO-led Global Framework for Climate Services (called “GFCS twinning”). The GFCS
program seeks to promote science-based, user-tailored climate information and prediction in
four priority areas – among which agriculture and food security. Fed into planning, policy and
practice level, this enables better management of and adaptation to the risks arising from
climate variability and change on the global, regional and national scale.
Eng. AMELIA DÍAZ PABLÓ
Executive President of SENAMHI
Permanent Representative of Peru with WMO
5. 5
Adverse meteorological and climatological events continue to
increase in frequency and intensity (IPCC, 2012).
Globally, annual economic losses from disasters exceeded USD 100
billion for three consecutive years (USD 138 billion in 2010, USD 371
billion in 2011, and USD 138 billion in 2012), (UNISDR, 2013).
8. 8
Peru has 7.6 million hectares of cropland and 32% of the economically active population works
in the agricultural sector, which is particularly climate sensitive. Climate-related problems such
as diseases and high-impact weather events lead to significant crop losses which cause serious
socio-economic consequences for farmers, as well as endanger food security. In addition, in a
changing and more strongly variable climate, ancient techniques used by farmers as preventive
measures do not show the expected results.
Impacts as these are challenging economic activities across numerous climate-sensitive sectors
around the globe. Climate services such as early warning systems can provide essential,
science-based information in support of national and international adaptation and mitigation
strategies to reduce economic losses and negative societal impacts. This is particularly true
for the agricultural sector where user-tailored early warning systems can support preventive
measures to avoid, or reduce, yield losses and generate substantial socio-economic benefits by
improving the farmer’s decision making.
These potential benefits have been assessed by the Peruvian National Service for Meteorology
and Hydrology (SENAMHI) and the Swiss Federal Office of Meteorology and Climatology
(MeteoSwiss) on the basis of the farmers’ willingness to pay for a hypothetical early warning
system user-tailored for the coffee and maize production in Cusco. The analysis is based on a
stated preference method applied to survey data from more than 60 interviews with smallholder
farmers.
It is found that the socio-economic benefits of these enhanced climate services for the pro-
duction of the two crops over a 10-year period amount to about USD 10 million for the region
Cusco and well over USD 100 million for Peru as a whole. These results can be considered con-
servative estimates representing a lower limit of the benefits as a number of additional positive
externalities are not considered in this study.
Socio-Economic Benefits
(over 10 years operation time; discount rate 4%)
Own calculations.
Region Cusco Maximum
Coffee USD 14 million
Maize USD 3 million
Total USD 17 million
Peru Maximum
Coffee USD 93 million
Maize USD 57 million
Total
Minimum
USD 9 million
USD 2 million
USD 11 million
Minimum
USD 63 million
USD 29 million
USD 92 million USD 150 million
10. 10
The impacts of climate change and climate variability pose risks for natural systems, society and
economic activities including agriculture, which is particularly climate-sensitive (IPCC, 2014).
High-impact events such as droughts, heavy rainfalls, floods and frost can cause substantial ne-
gative consequences on crop and croplands entailing severe social and economic consequences
for smallholder farmers. A recent example is the severe drought in Central America with yield
losses in the maize production estimated at up to 70% (FAO, 2014).
Moreover, climate conditions favor the occurrence of certain plant diseases, leading to devas-
tating impacts on productivity. In 2013, the severe outbreak of coffee rust in Latin America
decreased production and boosted expenditures on additional pest control. In Central America,
for instance, over 50% of the total growing area has been affected by the disease causing eco-
nomic costs of USD 500 million in 2012/2013 (ICO, 2013b). The spread of the coffee rust disease
in the various parts of Peru is shown in a figure on page 13.
More than half of global food production is delivered by smallholder farmers and, thus, con-
tribute significantly to food security and nutrition (UNEP, 2013). Furthermore, smallholder far-
ming is a substantial part of employment in rural regions where the agricultural sector plays a
central role for the local economy. On the other hand, smallholder farmers are highly vulnerable
to climate-related events since they often lack suitable warning services and are unable to apply
preventive measures against negative impacts.
Early warning systems can mitigate and even prevent losses from high-impact events and cons-
titute a cost-effective measure to build resilience of smallholder farmers to climate variability
and change. This importance was recently emphasized in the new Framework for Disaster Risk
Reduction adopted in Sendai earlier this year (UNISDR, 2015). Very much along this line, the
Third World Climate Conference held in 2009, and extraordinary Congress in 2012 mandated
the Global Framework for Climate Services (GFCS) where agriculture and food security was
identified as one of the four priority areas established so far (WMO, 2014).
In general, due to high infrastructural investments, the development and implementation of
early warning systems is very likely to be financed and provided publicly. It is therefore fun-
damental to generate public policies for mobilizing the required public financial resources to
extend and maintain these systems. An essential tool towards reaching this goal are studies
providing quantitative evidence of the socio-economic benefits (SEB) provided by such climate
services. The importance of SEB case studies in the hydro-meteorological sector is stressed in
the Madrid Action Plan in 2007 by the World Meteorological Organization (WMO, 2007).
SENAMHI and MeteoSwiss have carried out a case study to assess the socio-economic benefits
of user-tailored early warning systems for smallholder coffee and maize farmers in the rural
Andean region Cusco. The study is strongly linked to the Peruvian-Swiss GFCS-twinning project
CLIMANDES (Servicios climáticos con énfasis en los Andes en apoyo a las decisiones), a strate-
gic alliance between the World Meteorological Organization, the Swiss Meteorological Service
(Meteoswiss), Meteodat, Berne University (Switzerland), La Molina University and the Peruvian
National Meteorological and Hydrological Service (SENAMHI) which receives technical support
and funding from Swiss Agency for Development and Cooperation (SDC). The project seeks
to raise the decision-makers’ awareness of the benefits of user-tailored climate services in the
Andes region.
13. 13
As user-tailored climate services do not yet exist in the study region, a survey scenario which
describes a hypothetical market for early warning systems (alerta_roya and alerta_maíz) is de-
veloped. A sample of 63 smallholder farmers is asked direct and indirect questions about their
willingness to pay for these products in order to quantify the economic benefit.
Alerta_roya is designed as an early warning system providing coffee farmer with an alert in case
of increased risk of coffee rust outbreak based on air temperature, humidity and precipitation
measurements. Using this information and combining it with agronomic expertise, farmers can
decide on preventive measures (e.g. use of fungicides) to mitigate the impact of the disease.
Alerta_maíz is designed as early warning system that warns farmers of frost or heat waves. De-
pending on the phenological stage of the plants, these events can affect their growing process,
deteriorate the leaves and roots and can alter the fructification process leading to a diminish-
ment of quantity and quality. In a period with expected frost, the farmer has the opportunity
to postpone the seedtime. In case of a heat wave, water management could be optimized to
prevent water deficits.
The questionnaire consists of two parts. A general part elicits information about the farmers‘
socio-economic characteristics as well as their perception and use of existing climate services
provided by SENAMHI. The second part is designed to extract the farmers‘ willingness to pay
for the specific early warning system under consideration (alerta_roya and alerta_maíz). These
climate services are described by the annual cost to the farmer‘s household and three attribu-
tes. Based on expert interviews as well as on experience from existing studies of individuals’
value for weather forecasts (Lazo & Chestnut, 2002; Lazo & Waldman, 2011), three climate
service attributes are defined: frequency of updates, geographic resolution and accuracy of the
information.
Effects of the yellow
Rust on coffee
Preliminary assessment
By regions (%)
March April
Affected regions
REF:
At na onal level
In April It reached
51% infected
With yellow rust
In marchc
it reached 43%
Ways of ge ng infected
The plant gets infected when there is high humidity and too much
water on the leaves. It could be due to:
Water from rainfall
Wind, sprinkles
or drags water
Use of tools
in different farms
Animals
Infected seeds
The rust fungus quickly spreads
due to constant climate changes
Symptoms:
It starts showing
small yellow, orange
and black spots.
At first the spots are small
and round.
They have almost 5 mm
diameter and they can grow
up to 10 mes more.
The infec ons and sporula on
or produc on of spores start
to show on the underside of
the leaf.
Hemileia
vastatrix
(Coffee rust)
Source: Ministry of Agriculture LA REPÚBLICA
Ucayali
33
70
Cusco 27
29
Puno
64
57
Amazonas 55
64
Cajamarca 44
30
San Martín 36
36
Huánuco 32
49
Pasco 58
61
Junín 48
64
Ayacucho 48
52
18. 18
USD 54 USD 80
USD 19 USD 29
USD 8 USD 16
USD 6 USD 12
Table 1 Socio-economic benefits of the coffee and maize sector at individual farm level
Socio-Economic Benefit - Individual level
Own calculations.
Coffee (alerta_roya) Maximum
Annual per farm value
Annual per hectare value
Maize (alerta_maiz) Maximum
Annual per farm value
Annual per hectare value
Minimum
Minimum
can be particularly harmful to the coffee plant depending on the phenological stage. Maize
farmers mention frost as the most influential climate related stress factor followed by drought
and hail. Similar to coffee crops, the occurrence of such an event can severely harm the maize
plant if it is in a delicate phenological stage. In contrast to the coffee producers, maize farmers
report diseases to be less of an issue.
4.2 Economic valuation of early warning systems
The Random Utility Model is used to derive monetary values that represent the farmer‘s benefit
of the climate services. The hypothetical early warning systems (alerta_roya and alerta_maíz)
are characterized by annual costs and three attributes: frequency of updates, geographic reso-
lution, and forecast accuracy. Data analysis reveal that these attributes have a plausible and ex-
pected impact on the farmer’s valuation: geographically more detailed information and lower
annual costs of the climate services significantly increase the farmers’ benefits.
As the valuation is linked to the attributes of the hypothetical early warning systems, assump-
tions regarding accuracy and geographic resolution had to be made. Therefore, two types of
hypothetical climate products of different quality are defined (a minimum (“min”) and a maxi-
mum (“max”) product) to reflect the uncertainty related to accuracy and geographic resolution.
Accuracy is assumed to vary between 70% (min) and 90% (max) and the geographic resolution
between 25 km (max) and 100 km (min). Since specific climate services for the coffee and maize
sector do not yet exist in the study area, the baseline is assumed to be 0% accuracy and 140 km
geographic resolution.
Table 1 reports that the annual value of the early warning system per farm is higher in the coffee
sector with USD 54 (min) to USD 80 (max). The annual value per farm in the maize sector is USD
8 (min) to USD 16 (max). As coffee farms were larger than maize farms, it is useful to calculate
the service value per hectare resulting in USD 19 (min) to USD 29 (max) for coffee and USD 6
to USD 12 (max) for maize.
There may be several reasons for the higher valuation of the early warning system by coffee
farmers. The outbreak of coffee rust in the sample region may be the main explanation for this
finding. As mentioned before, this disease had a devastating economic effect in 2013 leading
to higher expected benefits of the climate service. Moreover, further analysis shows that the
farmers’ willingness to pay for the climate service is positively related to their educational bac-
kground. This suggests that a higher education is associated with a better understanding and,
hence, with a higher valuation of the climate service. In fact, average education level of coffee
farmers in the sample is slightly higher. Furthermore, with coffee being a cash crop, the farmers
may be more experienced in economic and monetary reasoning, again increasing their ability
to optimize the production process with the hypothetical climate service presented to them.
21. 21
The present case study aimed at estimating the
socio-economic benefits of user-tailored early
warning systems for coffee and maize smallholder
farmers in Peru. The study is conducted in the region
Cusco, in order to exploit synergies with the GFCS
twinning project CLIMANDES. The analysis is based
on the stated preference method, an econometric
approach based on field survey data. The results
indicate - over a period of 10 years - socio-economic
benefits for the coffee and maize production of
about USD 10 million for the region Cusco and well
over USD 100 million for Peru as a whole. These
results are conservative estimates and can be seen as
a lower limit of the benefits, given a number of
positive externalities not addressed in this study, e.g.
by reducing public health costs due to more efficient
use of agrochemical products.
The study results identify a clear need for early
warning systems. This is especially true for farmers
which face concrete climate-related problems and
have the possibility to apply preventive measures as
in the case of coffee rust. This finding demonstrates
the potential value of early warning systems to
improve smallholders' livelihoods by increasing their
resilience against high-impact weather and climate
events. Such climate services can build a fundamen-
tal element for disaster risk reduction as recently
underlined in the Sendai Framework for Disaster Risk
Reduction. In this context, NMHSs play an essential
role in ensuring food security and reducing poverty
and thus increasing a country's adaptation capacity
to climate change.
22. 22
However, this study also points out that
agricultural decision-making is based on
climate information to a small extent only.
This underscores that the user groups'
acceptance of climate services cannot be
taken for granted and should be borne in
mind when analysing the benefit of such
services. Thus, improving the user-dialog and
involving the end-user into the design of
sector-specific products is a key element of
climate service development. This insight is
stressed out by the Global Framework for
Climate Services (GFCS) that encourages the
development of effective partnerships and
dialogue between service providers and users
of climate services.
This case study is a successful first step in
quantifying the socio-economic benefits of
early warning systems in the agricultural
sector. As the mobilization of public resources
is vital to extending and maintaining such
climate services, further case studies are
required in order to justify the corresponding
public investments.
24. 24
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